Copy of `Clerical Medical - Glossary of stocks and shares`

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A-DayOn 6 April 2006 the Government will implement a new single tax regime for pensions. This is being called A-Day. With the introduction of the Finance Act, pensions will become simpler to understand.

ActuaryProfessional who calculates risks and costs related to life assurance and investment policies.

AnnuityA type of contract where an agreed amount is paid yearly for life or an agreed shorter period.

AssuranceAlso known as insurance but generally used for life assurance. Insurance covers an uncertain event whereas life assurance covers a certain event (ie death) only where the date is unknown.

BondsA certificate of debt issued by governments or major companies. Bonds issued by the British Government are called Gilts.

Company pension policyA pension policy operated by an employer for its employees. Generally, the employer helps fund employee contributions. However, some company schemes exist only for administrative convenience.

ContributionAlso known as a `premium` and usually used with regard to personal payments into a pension scheme or into investment-based products.

Critical illness policyA policy that pays out a capital sum in the event of a qualifying illness being diagnosed eg certain cancers. They can stand alone or be written as an `add-on` to a variety of other contracts eg whole of life.

Endowment assuranceA savings contract, medium to long-term life assurance-linked, that has an investment element and a protection element. The policy will pay out on surrender, maturity or death.

Endowment mortgageAn interest-only house purchase loan. With an associated endowment policy. The aim is to pay the outstanding capital at the end of the term and provide life assurance for the value of the capital on death before maturity. However for most endowment policies the final sum and repayment is not guaranteed.

Financial Services Authority (FSA)This is the government body that regulates all aspects of the financial services industry in the UK.

FTSE 100 indexThe FTSE 100 is a benchmark index tracking the performance of the London Stock Exchange. The full name is Financial Times Stock Exchange 100, but it's commonly called the Footsie. The FTSE 100 comprises the 100 largest companies traded on the exchange.

Fund managerThe professional who runs an investment fund and decides what shares, bonds or gilts the fund should buy or sell.

GiltsFixed rate bonds issued and guaranteed by the UK Government.

IncomeMoney received from wages (earned) or from investments (unearned).

InflationPut simply, inflation is the general increase of prices and subsequent fall in purchasing power of money. The cycle of price inflation starts when production costs increase for the same level of production which results in an increase in the product price. This leads to a reduction of purchasing power which in turn, leads to higher wage demands, and therefore, higher production costs.

InsuranceA contract in which the recipient of agreed payments agrees to compensate the payer in the event of certain events i.e. loss, damage, injury, death, etc.

InvestmentThe use of money to generate income and/or capital growth.

ISA (Individual savings account)Tax efficient environment in which to hold savings. Introduced by the UK Government on 6 April 1999 to replace PEP and TESSA products. They enable savings to be held in the form of stocks and shares, cash or life assurance, or any combination of these three asset types.

Life assuranceA general term to describe different types of personal protection policy, whose main purpose is to provide payment in the event of death.

Life insuranceAn alternative phrase used to describe Life Assurance (see Assurance described above).

MortgageA type of loan used to purchase property. In order for a borrower (mortgagor) to give a mortgage to a lender (mortgagee) they must obtain a legal charge on the property, giving security for a loan.

OffshoreAnywhere outside the United Kingdom.

PAI (Personal accident insurance)A policy that will pay out an income or a lump sum in the event of disability, dismemberment or death, caused by an accident. Personal Accident Insurance is not Life Assurance.

PensionAn annual income, usually associated with the period after retirement, but not necessarily so. A pension fund is a general term used to describe an investment fund built up during working life and used at retirement to purchase an annuity to provide a continuing income.

Pension mortgageA mortgage secured by repayment of the loan from the tax-free cash option available from a pension scheme at retirement.

PEP (Personal equity plan)Although no longer available, these contracts allowed limited tax-efficient investments; which may be transferred to various different investment funds.

PHI (Permanent health insurance)A policy which will provide an income in the event of a long-term absence from work because of illness or disability; income ceases upon return to work, retirement or death.

PolicyFormal document produced by an insurance company which includes all contract details, i.e., sum assured or insured, premium and payment frequency, term of contract, etc.

PPP (Personal pension policy)A pension policy available to employed persons who do not qualify for, or are not members of, an occupational scheme. Also available to the self-employed with Net Relevant Earnings.

PremiumA regular payment of money into a policy to secure the contract. It also describes what is paid for a share over its par value. Premiums are sometimes also known as contributions.

RemortgageReplacing an existing mortgage loan with another one.

Repayment mortgageAlso known as `annuity mortgage`. A type of loan repayment that comprises of instalments made up of capital and interest.

RetirementThe point in life where one has given up full time work.

RiskIn terms of insurance, risk is the likelihood of a claim being made on a policy. In terms of investment, risk is a subjective view that comprises a balance of potential loss with potential gain.

State pension schemeIn the UK, a flat rate sum paid to all persons with qualifying National Insurance Contributions (the full basic pension currently stands at £77.45 per week (tax year 2003-2004)).

State second pension(replaced SERPS) From 6 April 2002, the State Second Pension replaced the State Earning Related Pension Scheme (SERPS). This pension provides a more generous additional state pension for low to middle earners as well as certain carers and those with a long-term illness. This pension is paid in addition to the basic State Pension and depends on your earnings during employment and National Insurance contributions you have paid.

YieldThe income from an investment, expressed as a percentage of its current market price.

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